India's biggest drug manufacturer Ranbaxy Laboratories Ltd. and Merck & Co. agree to develop new anti-infective products, the companies reported in a statement on Monday.

The collaboration aims to find new anti-bacterial and anti-fungal drug compounds where Ranbaxy will develop drugs through the first two clinical trials and Merck will continue with the later stage developments and commercialization of the product. The companies will join the project for an initial period of five years starting in 2008.

Inside the terms of the agreement Ranbaxy will get an undisclosed upfront payment and further payments that are estimated at more than $100 million the company said. Merck will be benefited from expanding its products in areas where it is weak.

Some pharmaceutical companies are partnering with companies in Asia, including China and India to research and reduce costs as they are under pressure of patents expiration.

Ranbaxy is the biggest pharmaceutical company in India known best as a generic manufacturer company. Its shares rose today 5.4 percent to 495 rupees at 3:30 p.m. local time on the Bombay stock Exchange.

Shares of Merck & Co. closed 1.62 percent higher to $39.62 on Monday at the New York Stock Exchange.